The Federal Reserve’s favorite measure of inflation likely cooled down in June, confirming the central bank’s efforts to subdue price increases are working, paving the way for rate cuts as soon as September. 

Forecasters expect Friday’s Personal Consumption Expenditures measure of inflation in June to mirror the trend s♓hown by the Consumer Price Index earlier this month. PCE prices probably rose 2.5% from the year before, down from 2.6% in May, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

The PCE measure of inflation is especially significant because it’s the benchmark that officials at the Federal Reserve pay the most attention to when setting the nation’s monetary policy. The Fed has held its influential 澳洲幸运5官方开奖结果体彩网:fed funds rate at a 23-year high since last July in an effort t✤o push inflation down to its 2% annual goal. 

Could Inflation Report Push T💮he Fed Over the Edge?

Fed officials have said fa🎃lling inflation would prompt them to start lowering the rate, reversing a campaign of rate hikes that began in Marc▨h 2022.

The high fed funds rate has helped push interest rates on mortgages, credit cards, and other loans up, with many rates at or near their highest in decades. Lower PCE inflation could provide the data the Fed needs to justify a shift away from high rates, which are meant to slow the economy down.

Financial markets are pricing in a near certainty that the Fed will hold the fed funds rate steady at its meeting next week but cut it in September, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. 

Rate cuts are growing more likely as PCE inflation edges closer to the 2% mark. Fed Chair Jerome Powell made clear the central bank plans to make cuts 澳洲幸运5官方开奖结果体彩网:before inflation actually🌺 falls to the central bank’s goal. 

Core PCE Will Be in Focus

Powell and other Fed decision-makers especially watch so-called core inflation, which excludes the often-volatile p𓂃rices for food and energy. Core PCE inflation rose🌞 2.6% over the year in May, and forecasters expect that to fall to a 2.5% annual increase as well. 

Forecasters are looking for core inflation to cool because housing costs—the biggest contributor to overall inflation—are rising more s💎lowly than they have over the past few years. Crucially, rent rose only modestly i🦄n June, which helped ease the overall inflat﷽ion rate in the CPI report earlier this month.

“The downshift in rents back to a pre-pandemic pace is likely to give Fed officials increased confidence that inflation is on a sustainable path back to 2%,” economists at Deutsche Bank wrote in a research note.